U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20395 / December 12, 2007
SEC v. Terry E. Provence and DT Capital LLC, Case. No. 07-23167-Cooke (S.D. Fla., filed December 6, 2007).
SEC Brings Emergency Action in Connection With Fraudulent Index Options Trading Scheme
The Securities and Exchange Commission (SEC or the Commission) announced that on December 6, 2007, it filed an emergency civil action against Terry E. Provence (Provence) and DT Capital LLC (DT Capital), in connection with their alleged roles in a fraudulent options trading scheme. On December 7, 2007, the Honorable K. Michael Moore, United States District Judge for the Southern District of Florida entered, among other things, an emergency order temporarily freezing the assets of Provence and DT Capital.
The Commission's complaint (Complaint) alleges that no later than March 2007 and continuing until at least August 2007, Provence pitched a sham index option trading program to primarily inexperienced investors with false promises that their principal would be safe. The Complaint also alleges that Provence created, controlled and used DT Capital as a vehicle to marshal investor funds and promote the options program. The Complaint further alleges that Provence and DT Capital falsely represented that a major brokerage firm guaranteed the safety of investor principal, that the actual options trader, Fredrick J. Kunen (Kunen), was a licensed securities trader and director at the brokerage firm, that the options program had a successful ten-year track record, and that investors could expect extraordinary returns. Kunen died on July 11, 2007. In addition, the Complaint alleges, among other things, that Provence and DT Capital used their misrepresentations to raise at least $3.5 million from approximately forty investors and that Provence and DT Capital profited by at least $130,000.
The Commission's Complaint charges Provence and DT Capital with violating the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and with violating Section 15(a) of the Exchange Act. The Complaint seeks, among other things, preliminary and permanent injunctions against Provence and DT Capital, disgorgement of ill-gotten profits and civil money penalties against Provence and DT Capital, and an accounting from Provence and DT Capital.
Previously, on August 23, 2007, the Commission filed a civil action against the personal representative of Kunen's probate estate, seeking, among other things, an asset freeze and the appointment of a Receiver over the estate. SEC v. Charles O. Morgan, Jr., as Personal Representative of the Estate of Frederick J. Kunen, Case No. 07-22204-CIV-GOLD (S.D. Fla.). For more information on this case see Litigation Release No. 20253 (August 24, 2007).